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Newsday, Friday, November 9, 2001

If Disaster Strikes, Are You Covered?

By Ronald E. Roel

IN THE WEEKS since the World Trade Center disaster, much discussion has been generated on the subject of business insurance, particularly the huge spikes expected in premiums next year. Cataclysmic events like terrorist attacks will do that.

Consumers, on the other hand, are not likely to see significant changes in home insurance premiums, which require approval from state regulatory agencies before they can be raised.

Still, experts say the stunning images of the Twin Towers collapsing should raise an key question for homeowners:

If my home were destroyed in some disaster, how much money would I get to replace it?

"The time to find out you're underinsured is not after a loss," says Peter Breitstone, president and owner of Breitstone & Co. Ltd., a Cedarhurst-based insurance brokerage and con-suiting firm.

While very few homeowner losses are "totals," according to industry analysts, it's worth it to sit down now and take stock of what you have and how to protect it, Breitstone says.

The main valuation issue concerns whether your insurance covers "actual cash value" or the "replacement cost" of insured property. In short, actual cash value insurance covers the cost of the property minus the depreciation in value over the life of the property -before it was lost; replacement cost eliminates the deduction for depreciation and covers the cost of replacement with like kind and quality."

Naturally, the goal for most of us is to secure replacement cost coverage, But ahhh, there are nuances to figuring this out - of course.

William Raphaely, regional underwriting manager for the Long Island region of the Chubb Group, says his firm begins by sending appraisers to visit a home, examining it for "loss control" (protections against fire, burglary, other hazards), then determining the replacement cost of structures and items with "like-kind" materials.

Chubb will guarantee the replacement cost - there are no caps - as long as the homeowner has insured the property to the value determined by the company's appraisers, Raphaely says. The replacement cost is not tied to the market value of your home.

Chubb's policies tend to be written for the upper end of the market, including historic homes or newer high-end houses of unique construction, but the basic approach to valuation applies widely, Breitstone says.

Homeowners, he says, should ask their insurance agents what would happen if... say, the house burns down?

"Go through scenarios with your agent," Breitstone says, "and ask yourself, 'What do I have, and what would it take to protect it?'"

Most homeowners should re-appraise their property at least every five years, experts say.

Breitstone points to two areas, in particular, where property tends to be underinsured. One is jewelry, often expensive pieces bought years ago, but not reappraised regularly for current replacement value. The other area is the replacement of structures, where homeowners either have done renovations in recent years and have not accounted for the increased value; or where they have not done any updating in recent years and therefore are not aware of what the current replacement costs would be.

Experts acknowledge that not everyone can afford guaranteed replacement coverage. But the aim is to make "conscious decisions" about what risks you're willing to take, Breitstone says. "At least understand what, if anything, you're giving up when you pay less for homeowners insurance."

Environmental Seminar

Next Friday's Real Estate Section will feature a cover story examining how homeowners can check for potential environmental hazards when buying a home. For those who want get a jump on such issues, the Metropolitan Association of Home Inspectors is conducting a seminar that day, Nov. 16, that will include presentations on residential electrical wiring, heating systems and toxic molds.

The seminar is designed for inspectors, contractors and real estate agents but also for homeowners who want to invest a bit of time and money to learn more about these topics.

The cost for consumers is $110 for an all-day seminar (8 a.m. to 5 p.m., including breakfast and lunch) at the Coral House on 70 Milburn Ave., Baldwin. For more information, call Michael Diesu of Deepdale Building Inspections in St. James at 631-862-4677.

Real Estate Editor Ronald E. Roel welcomes your comments and questions. He may be contacted by e-mail at roel@newsday.com.